PLEASE HELP: Pay off credit card or greater deposit?

ukamber1

Hi All,

Please could someone help by answering this question for me. Which would look better on a mortgage application?

1) 0 balance on a credit card and a lower deposit

2) Higher deposit but £3000 on a credit card balance

From a affordability stand point I'm looking to borrow alot less than I could as wanting a small mortgage so repayments will be almost 50% what I pay currently in rent, so managing the credit card repayments isnt an issue. (I only have one credit card and no other debts) I just wasnt sure if the extra £3000 savings would be better to use as a deposit (as could mean better mortgage rate) or clear the credit card before doing a mortgage application. Both options would seem to make sense but I'm no expert and would appreciate if someone that has had experience of this, might be able to help.......many thanks for any help

Thrugelmir

For your own peace of mind clear the debt.

ThePants999

If you're borrowing a lot less than you could, the credit card debt will be a non-issue in affordability checks, so I'd have the larger deposit personally.

ukamber1

ThePants999 wrote: »

If you're borrowing a lot less than you could, the credit card debt will be a non-issue in affordability checks, so I'd have the larger deposit personally.

Hi ThePants999,

Thanks for your reply...That was the thing that was playing around in my mind. My mortgage would likely be around £500 a month less than the rent I've been paying the last 3 years and the 3k I'd be using to pay off the credit card, could be the difference between a 80% LTV product and having to pay a higher rate. I guess no right or wrong option but just wasnt sure from a Lender standpoint, which makes my application look better.......thanks again

muhandis

I'd echo what Pants says above, if it means the difference between going up an LTV band, I'd go for the bigger deposit as well.

We're planning to do the same with a couple 0% cards when our current 2 year fix deal ends next year to get into a higher LTV bracket. We'll be doing a product switch though, so most likely there won't an affordability check.

If you want reassurance re: a specific lender, I'd use the lender's intermediary calculator and try out both scenarios on it.

ukamber1 wrote: »

Hi ThePants999,

Thanks for your reply...That was the thing that was playing around in my mind. My mortgage would likely be around £500 a month less than the rent I've been paying the last 3 years and the 3k I'd be using to pay off the credit card, could be the difference between a 80% LTV product and having to pay a higher rate. I guess no right or wrong option but just wasnt sure from a Lender standpoint, which makes my application look better.......thanks again